What is a MAP Policy?
A Minimum Advertised Price (MAP) policy serves as a guiding principle that establishes the minimum price at which resellers, be they distributors or retailers, can advertise a product.
Understanding MAP Price
In simpler terms, Minimum Advertised Pricing (MAP) signifies the lowest price that resellers are allowed to promote a product for sale. By implementing MAP, brands define a baseline for advertised prices set by their downstream partners, spanning both online and brick-and-mortar retail environments.
Delving Deeper into MAP
When discussing MAP, the operative term is “advertised.” MAP policies exclusively pertain to the advertised price of a product; they do not seek to regulate the actual selling price of the product. For instance, consider a scenario where your brand produces water bottles, and you establish a MAP price of $45. This implies that all your sellers, whether in brick-and-mortar stores or online, must promote your product for $45 or more. If they advertise it for less, they risk the consequences associated with violating your MAP policy. It’s important to note that while resellers cannot advertise the specific product for a lower price, they are permitted to sell it for less.
The Significance of MAP Policies
So, why do MAP policies exist when selling products below their MAP is possible? To address this, let’s explore the advantages of MAP.
Benefits of MAP
An effective MAP policy offers advantages to all stakeholders, ranging from brands and distributors to retailers. When brands set a price, they gain greater control over their products throughout the supply chain. Maintaining consistent pricing across distribution channels safeguards the perceived value of the product in the eyes of consumers and bolsters brand trust. Through MAP, manufacturers can shield their authorized partners and cultivate stronger business relationships with those who adhere to the policy. Keeping minimum advertised prices intact also serves to safeguard profit margins.
Preventing price erosion benefits both manufacturers and resellers. To remain competitive, retailers often lower their prices in response to competitors, sometimes even offering in-store price matching. For instance, larger retailers may opt to reduce prices substantially, sometimes at minimal profit, with the aim of eliminating competition. MAP permits them to offer enticing deals like BOGO (Buy One, Get One) or loyalty programs without advertising products for less. Ultimately, if reducing prices isn’t the optimal strategy, a robust MAP policy can encourage retailers to explore alternative ways of delivering value, such as loyalty programs and exceptional customer service.
MAP in the Physical and Digital Realms
In the physical realm, MAP policies pertain to off-site advertising, such as magazine and flyer promotions. Advertised prices may diverge from in-store prices since MAP doesn’t restrict in-store advertising or sales pricing. A well-enforced MAP policy, both offline and online, supports brick-and-mortar resellers in competing with digital counterparts.
MAP in the Digital World
In the digital landscape, the concept of an “advertised price” assumes greater significance, as there is often no clear differentiation between the advertised price and the actual selling price. When formulating a MAP policy for online advertising, brands may address the distinction between the advertised price and the selling price, which can be communicated differently. For example, an e-commerce reseller displaying the brand’s minimum price can offer coupons or discounts during checkout, like “add to cart to see price.” In this scenario, the price listed on an e-commerce website or platform constitutes the advertised price, while the online shopping cart resembles a physical store where a seller can sell at a price lower than the MAP.
Pricing Dynamics in the Digital Realm
Brand owners and resellers closely monitor their competition to make pricing decisions. Recognizing that consumers extensively compare prices online as part of their shopping journey, resellers may attempt to provide discounts to outperform their rivals. Pricing considerations are further influenced by repricing tools like Amazon’s auto-repricing, wherein Amazon automatically adjusts product prices within predetermined limits in response to price drops.
MSRP vs. MAP: Understanding the Distinction
Both MSRP (Manufacturer’s Suggested Retail Price) and MAP pertain to product pricing but operate differently. MAP prices define the minimum advertised price for a product, focusing solely on advertising, not on setting actual selling prices. This is where MSRP comes into play. MSRP represents the selling price recommended by the manufacturer at the point of sale.
The Legality of MAP Policies
It is advisable to examine the laws of the country where you conduct business and draft your MAP policy accordingly. The same applies when attempting to enforce your MAP policy in cases of violation.
In the United States, for example, setting MAP policies is legally permissible. A significant legal precedent in this context is the Leegin Creative Leather Products, Inc. v. PSKS, Inc. (2007) case. In this landmark ruling, the U.S. Supreme Court overturned the “per se illegal” doctrine regarding MAP. It declared that manufacturers establishing mandatory minimum prices for their products were not inherently illegal. Instead, these minimum prices would be evaluated under the “rule of reason.”
Understanding MAP Compliance
Authorized distributors and resellers can benefit from MAP policies by maintaining compliance, thereby enhancing their business and relationships with manufacturers. Brands may even offer incentives for compliance, such as priority supply agreements.
In many MAP policies, compliance serves as a prerequisite for a reseller’s ongoing access to the brand’s products, sometimes leading to termination of a distribution agreement. Nevertheless, MAP violations are not uncommon. Resellers without formal affiliations with the manufacturer are more likely to breach MAP.
The Solution: Monitoring and Enforcement
MAP policies are only effective if they are actively enforced. So, how can you enforce MAP policy violations?
The first step for brands is to establish a clear and comprehensive MAP policy that applies uniformly to all resellers. Publicly disclosing this policy demonstrates commitment and lends support to enforcement efforts.
In the digital realm, where MAP requires strong backing, brands must vigilantly monitor their products across numerous channels and countless resellers in a rapidly evolving landscape.
When a violation is identified, it’s essential to take action in accordance with the MAP policy. For example, a first offense may warrant a written warning. If the retailer fails to comply or commits a second violation, the policy may call for the suspension of the reseller for a predetermined period.
Upon a third violation, the policy often stipulates that the manufacturer should cease doing business with the distributor or retailer. In such cases, if the reseller still possesses products and refuses to comply, the brand can issue a cease-and-desist letter. If the reseller persists in non-compliance, the brand has the option to discontinue supplying them with goods.
In conjunction with MAP policies, additional measures can be implemented. For instance, a distribution policy can enable a brand to unilaterally suspend resellers who operate through unauthorized e-commerce platforms.
Enhancing MAP Policy Enforcement
The value of a MAP policy lies in its consistent and proactive enforcement. Ongoing monitoring of advertising in both physical and digital realms is central to brand performance, encompassing price maintenance, margin protection, and the identification of unauthorized sellers. Upon detecting violations, prompt action should be taken.